1. State Retirement Savings Initiatives A Win-Win Opportunity
NCPERS Webinar April 18, 2017
Presented by:
Cathie Eitelberg Rocky Joyner

2. In the Beginning….Our Starting Point

3. Principles of Retirement Security
Stable Contributions
Equalize Risk
Committed Funding
Universal Retirement Plan Coverage
Replace Income
Efficient and Transparent Governance
Qualities of a Sustainable Pension Plan

4. The Secure Choice Plan Principles of Plan Design
Lifetime retirement income
Encourage retirement saving
Flexibility, portability and preservation
Managed by public entities
Conservative investment options
Limit employer role to enrollment

5. Evolution of Secure Choice Plans…. Five Years in the Making
SCP attracts the attention of California State Senate Leader DeLeon
States of Illinois, Connecticut, Massachusetts, California and Maryland continue moving to implementation
2011
2012
2013
2014
2015
NCPERS Develops Secure Choice Pension Plan Model
Legislation passes in California
U.S. Department of Labor considers safe harbor rules for workforce based payroll-deduction plans
California and Connecticut complete feasibility reviews
Secure Choice Pension Plan becomes Secure Choice Plan structured as a payroll-deduction-IRA
New Jersey and Washington establish “Market Place Plans”

6. Evolution of Secure Choice Plans…. Five Years in the Making
2016
2017
Congress overturns municipalities regulations
Oregon starts its implementation process
Illinois starts its implementation process
Congressional action pending on state regulations
2016 Maryland passes enabling legislation
DOL issues safe-harbor rules for payroll-deduction IRA plans applicable to states and large municipalities

7. State Actions
Six states have taken steps to establish retirement account programs
California
Connecticut
Illinois
Maryland
Massachusetts
Oregon

8. State Actions
Two states are setting up marketplace websites to facilitate retirement savings
New Jersey
Washington

9. Plans With Enacted LegislationCA CT IL MD NJ OR WA
Program Type
Payroll IRA
Default to Traditional
Payroll
Roth, survey on traditional
Roth
Exchange,
includes ERISA plans
Default to Roth
Exchange, includes ERISA plans
Covered Employers
>=5 EEs
>=25 EEs
>=10 EEs (30 hours)
<100 EEs
N/A
Workplace
Based
Yes No
Independent Analysis
Auto Features
(3%)
(6% recommended)
(5%)
Included
Investments
TDFs / Pooled Savings
TBD
TDFs
Broad range
TDFs / Balanced
TDFs / Capital Preservation
Current Status
Signed into law
RFP to be issued
In process
Vendor selected, implementation in process
Launched

10. Will Building a Better Base for Retirement Have Other Rewards?
Consider the following
Half of all full-time employees are saving nothing for retirement.
If these employees retire at age 65 with only Social Security, many will fall below eligibility limit for low-income social services.
They will be potentially eligible for various social subsidies including housing, food, transportation and Medicaid.
Of these Medicaid is one of the fastest growing segments of a state’s budget.
If a state were to implement an SCP-type retirement program and some modest number of employees availed themselves of it, what might the impact be on Medicaid expenditures?

11. Billions Potentially Saved on Medicaid Nationwide

12. States Could Save Big
States could achieve meaningful Medicaid savings by creating a work-based retirement savings plan for their private sector residents who currently are not saving. Key considerations:
Drive participation
Implement unique designs
Reduce administrative burdens
Ensure clear, friendly communications
For a mid-sized state this could include over 50,000 employers and 500,000 employees. For California, the potential number of participants is almost 7 million.

13. Estimated Medicaid Savings by State

14. How did we get to the numbers Methodology
1. Develop the set of full-time workers who are not currently saving
For each state, we collected age and salary information on all workers who were not saving for retirement.
Eliminated those under age 22 and those with less than $20,000 in annual salary as assumed to be part-time employees.
Estimated Social Security income as 36% of salary.
2. Estimated Medicaid per capita cost per state.
Develop an average cost per Medicaid enrollee.
Estimate the state portion using Health and Human resource data
Use Kaiser Family Foundation data to separate healthy over age 65 Medicaid enrollees from families and disabled enrollees.

15. How did we get to the numbers Methodology
3. Estimate 10-year potential Medicaid savings by state
Assume a gradual impact on currently vulnerable households as SCP savings will take time to accumulate.
Estimated savings start at 1% in year one for workers aged 64 and increase 1% a year to 5% for workers currently age 60.
Over time the individual accounts will grow and the potential for savings on state Medicaid expenditures increases exponentially. We have not projected savings beyond 10 years due to potential changes in the Medicaid program.

16. Increased Retirement Income is Good for All
Retirement income allows retirees to remain an active part of society.
This income has economic ripples that go beyond the individual and creates an impact that totals 2 to 3 times the amount of payment.
Reducing reliance on social welfare programs frees up capital for other needed public projects.
SCP-type programs can make the state tax dollar go further.
State Retirement Savings Initiatives A Win-Win Opportunity for All